Key prosecution witness to take stand at Martha Stewart trial
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The jury's perception of Faneuil may decide the outcome of the Martha Stewart trial.
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Lawyers for Martha Stewart say assistant broker Douglas Faneuil was star-struck by Stewart and lied to investigators. CNN's Deborah Feyerick reports (January 29)
Martha Stewart's lawyer says the government leaked information about his client's high-profile case to the media. CNN's Allan Chernoff reports (January 28)
CNN's Chris Huntington takes a look at how Martha Stewart's stock has bottomed out since she was accused of insider trading. (January 27)
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NEW YORK (CNN/Money) -- Prosecutors in the Martha Stewart criminal trial are expected to call their star witness on Thursday, a day after the judge presiding over the case postponed court proceedings due to a snow storm in the Northeast.
Douglas Faneuil, a former assistant to Stewart's broker at Merrill Lynch, will take the stand as the government's third and most crucial witness in the case against the lifestyle expert and her broker, Peter Bacanovic.
The trial is expected to resume at 10 a.m. ET.
The homemaking maven, who founded Martha Stewart Living Omnimedia, and Bacanovic are accused of obstructing an investigation into her sale in late 2001 of nearly 4,000 shares of ImClone, a biotech company founded by her friend Sam Waksal.
Faneuil's testimony is important to the government's contention that Stewart sold 3,928 ImClone shares only after receiving news from then-ImClone CEO Sam Waksal and did not have a prior agreement with Bacanovic to sell the stock when it fell to $60 a share.
Judge Miriam Goldman Cedarbaum ruled Wednesday that notes taken by Faneuil's first attorney can be viewed by Stewart's defense attorneys. Prosecutors had sought to have those notes excluded.
Assistant U.S. Attorney Karen Patton Seymour said Tuesday that Stewart had made the sale on "a secret tip" that no one else had, and then the prosecutor accused Stewart and Bacanovic, a co-defendant in the case, of hatching a plan to lie to investigators and come up with a false story about the stock sale.
"These crimes were part of a cover-up by the defendants. She did it to protect her own stake in her company worth hundreds of millions of dollars," said Seymour. "During this trial, we'll prove all of it to you beyond a reasonable doubt."
But Stewart's defense attorney fired back that such charges are based on nothing more than speculation and guesswork and are not backed by evidence.
"There will be no direct evidence introduced by the government that Martha Stewart conspired to obstruct anything," Stewart's lead attorney Robert Morvillo said in his opening statement. "No witness will appear in this courtroom during the trial to say 'Martha told me to do something unlawful'."
The attorney for Bacanovic said his client did nothing wrong and that the government was rushing to judgment.
"Would Peter Bacanovic jeopardize his entire career all for a lousy $450 commission? It simply makes no sense because it didn't happen," said Richard Strassberg. "The government is wrong. They've rushed to judgment. They've charged an innocent man."
Daniel Lynch, ImClone's acting chief officer, finished his testimony Tuesday after taking the stand as the prosecution's first witness. Lynch described the mechanics of the drugmaker's application for approval of a new cancer drug, Erbitux, in 2001.
Lynch also told the jury that he was aware of the friendship between Waksal, the founder and former CEO at ImClone, and Stewart.
Luciano Moschetta, director of compliance at Merrill Lynch, was called to the witness stand, and the government's second witness will probably finish his testimony on Thursday.
The 28-year-old Faneuil is due to take the stand after Moschetta's testimony. Bacanovic's former assistant pleaded guilty in October 2002 to misdemeanor charges of accepting perks for not coming forward to tell the government about an alleged insider's stock tip given to Stewart.
Earlier this week, Stewart's attorney, in what appeared to be a bid to discredit Faneuil, told the judge that Faneuil at various times had been advised to tell the truth to investigators and the SEC, but then told later to keep lying.
On Tuesday, Stewart sat at the front of a packed courtroom and listened intently as her long-awaited trial got underway. Also in the courtroom were Stewart's mother, daughter, sister and friends.
Waksal is currently serving a seven-year prison term after pleading guilty to charges of trying to sell ImClone stock a day before the government announced it had rejected the company's for Erbitux -- news that sent ImClone stock tumbling.
